If you are paying back a lot of debt, it can often feel like it’s going to be completely impossible to become debt-free. No matter your reasons for borrowing money, it can often be unavoidable to use a credit card or a loan, whether you needed to borrow for a big purchase like a car or used your credit card to cover an unexpected expense. Repaying your debts can take time, and if you are repaying several different lines of credit, it can quickly cut into your income and leave you without a lot of money left for spending or saving. The good news is that there are plenty of strategies that you can use to pay off your debt faster and become debt-free sooner. Some of the best options to consider include:
Debt consolidation may be one of the easiest ways to pay off all of your debt at the same time. You use a new line of credit to pay off your debts in full. While it does not mean that you are now debt-free, you now only have one debt to repay, which can be much easier to manage compared to several, and it will help prevent you from falling into financial difficulties. You can get loans, credit cards, and other credit types that are designed to help you consolidate debt.
Debt Repayment Plan
Rather than only making the minimum payments to your debt each month to keep you in the clear, it’s a good idea to sit down and work out a personalized debt repayment plan to help you put more towards repaying your debts and get them cleared faster. Tally can help with this debt payoff planner that goes through everything you need to do to pay off your debts in the shortest amount of time and in a way that is affordable to you. Along with a handy debt payoff planner, Tally can also offer a line of low-interest credit that you can use to consolidate and pay off your credit cards, leaving you with just one payment to make each month rather than several, which can make it easier for you to become debt-free faster and repay more towards other debts you might have.
Debt Snowball Method
The debt snowball method is a means of repaying your debts that is becoming more and more popular these days. Using this method, you pay off your debts from the smallest to the largest. Pay as much as you can towards your smallest debt while making the minimum payment on any other debts, until the smallest debt is completely paid off and cleared. Once that account has been closed and you have made the final payment, take the amount that you have been putting towards that debt each month and put it towards the next debt up in size, along with the minimum payment that you have been making towards it. Continue until this debt has been cleared, and then start on the next one. As each debt is repaid, you are freeing up more money that you can put towards another.
Debt Avalanche Method
While the debt snowball method is a fairly simple way of doing things, it does not always account for the fact that some debts charge more interest than others. It’s important to consider the interest that you are paying on each of your debts before deciding if the debt snowball method is actually going to be the best option for you. In some cases, it might make more financial sense to start repaying the debt with the highest interest rate first, which is where the debt avalanche method comes in. It works in a similar way to the debt snowball method, but rather than paying off the smallest debt first, you will start with the debt that charges the highest interest rate. Once this is paid, you can then go ahead and put the amount you’ve been paying towards that debt to the one with the new highest interest rate, until all are repaid.
Credit Card Balance Transfer
If the majority of your debts are credit cards, then a balance transfer could be ideal for helping you repay what you owe faster. Most people are paying monthly interest rates on their credit cards that could be reduced with a balance transfer. Transferring your credit card balance to a card with a lower interest rate, if possible, means that you will be paying more towards reducing your actual credit card balance each month and less in interest. Along with this, you can also find credit cards with no or low interest periods at the beginning. For example, if you transfer your balance to a card with a six-month interest free period, for six months, every penny that you pay will go towards reducing your balance, which can help you reduce it faster.
Debt Management Plan
If you are in a sticky financial situation and are unable to use any of the above methods to begin repaying your debts without it becoming unaffordable to you, then you might want to consider a debt management plan. You can do this yourself by contacting your creditors to negotiate monthly repayments, or through a company that will set up the plan for you and liaise with your creditors on your behalf. However, bear in mind that if you use a company to set up a debt management plan, they may charge a fee which will usually result in you spending more over time. Creditors have a duty of responsibility for their customers, so if you are struggling financially due to your debts, the best thing to do is contact them individually and come to an agreement that works for you.
Getting out of debt might seem impossible if bills are piling up and it seems that no matter what you pay, the balance doesn’t get any smaller. Using one or more of these strategies, you can get in control of your debt repayments and become debt free faster.